Victoria needs secure gas supply; not hopeful or over-capitalised proposals. The State is grappling with ensuring reliable and affordable gas supply, and there has been strong debate about potential solutions and interventions. Solutions should have a long-term security and cost focus and ideally be in place well before shortages arrive. That horse may have bolted, but now is the time for urgent and clear action.
The one agreed position is that securing gas supply is critical for Victoria and the East Coast. Gas shortages would cause human and economic hardship. Gas is critical to both industry and households, to transition away from coal, and to firm renewables. It will be the consistent through-line of the energy transition. AEMO’s GSOO Report released last Thursday reiterates – as it has done for many years – the urgent need for new supply.
The public debate has focussed on supply security (including sovereign production) and price. For each, it is important to focus on the underlying driver of the problem – the gas fields of the Bass Strait are drying up. These vast, cheap resources have supported Victoria for nearly six decades. They have been a world-class resource and extremely beneficial to Victoria – but they are a physical resource, they are dwindling, and there is no replacing them.
As a major manufacturer in Victoria, Viva Energy’s Geelong Refinery is one of the largest consumers of gas in the State and a critical supplier of fuel to both Victoria and the rest of the country. With over 70 years of operations, we share the concerns of other gas-reliant businesses and the 2 million Victorian households that rely on gas. For us, the pain of increasing gas prices threatens the long-term viability of our manufacturing operations.
Viva Energy is proposing to build a liquefied natural gas (LNG) terminal in Geelong, knowing that it may soon be the most important and reliable way to supply gas to the residents and businesses of our State.
A gas terminal in Victoria can solve our concerns permanently. It opens access to all of Australia’s and the world’s gas. It is minimal infrastructure – utilising an existing industrial location, floating processing equipment, and a short tie-in to the existing pipeline infrastructure. And it is flexible – when Victoria needs significant gas, it can deliver it; and as we reduce reliance on gas, it can flex down and ultimately sail away.
Alternative approaches have suggested that the East Coast states simply need to drill for more gas locally and reserve some of it for domestic use. While we welcome the search for new gas sources, it is now too late to meet our immediate need. Gas exploration is risky, complex, time consuming and expensive – any new sources that are found will take many years to develop and there is no guarantee they will be “cheap”. The volume we are losing from the Bass Strait is large, and there are no identified opportunities that can fill this gap.
Pipeline owners have suggested we need to expand or duplicate pipe connections from Queensland and the Northern Territory to the south. But not even these proposals deliver the significant increased capacity necessary to service Victoria’s winter needs – Melbourne is just too far away and too costly.
Typically, pipelines are financed on long-term payback assumptions, and they would take many years to plan, approve and execute. Multi-billion-dollar, long-term projects delivering inefficient outcomes are not going to fill the gap – and this is why there is no such proposal that solves Melbourne’s supply concerns. Further, these proposals rely on connecting to undeveloped gas fields in the Northern Territory – given the immediacy of the shortfall, nothing could be riskier or less responsible than to bank our State’s energy security on such an approach.
In contrast, a gas terminal could be operational in Geelong, delivering gas and removing all supply risk by winter 2028. For the first time, in addition to the global market, it will connect the East Coast market to resources like the gas fields in the North West of Australia. These resources have exclusively been available to export and for domestic use in Western Australia – but an import facility will finally connect Australia’s west with its east via shipping forming a “virtual pipeline”. Importantly, this solution is much cheaper and quicker to build, and with a significantly smaller physical impact.
As to gas prices, it is worth returning to the underlying problem. The Bass Strait field resources that are rapidly declining have benefitted Victorians with very cheap gas for many decades. These fields are not being replaced in size or efficiency and hoping for new discoveries that would do so is simply wishful thinking. Gas produced in Queensland is not cheap – it has a significantly higher cost base than Bass Strait gas, plus the addition of long-distance pipeline costs to get it to Victoria. New gas fields cannot be relied upon to return to historical gas prices. If the resources were that attractive, they would have already been developed.
As a result, wholesale gas pricing has already moved meaningfully in Australia – on average quadrupling since 2010. Further, the creation of an East Coast export market from Gladstone was achieved on the back of long-term deals with international customers in Asia. This international exposure changed the game for pricing many years ago, as the ACCC has long reported - but it is critical to note, this gas would not have been developed without that pricing support.
Contrary to the suggestion that gas terminals will elevate prices, expanding the potential supply sources will bring competitive pressure on prices. Gas terminals will bring diversity and market competition, and they will operate as markets do – when international gas is cheaper to land in Australia, it will flow, and if local gas is cheaper, the imported gas won’t be able to compete. Gas terminals will also add price transparency, as the market can clearly see the markers that are relied upon for both import in the south, and exports from Gladstone.
The ACCC has opined on this, and it is a point often missed. Its view is that gas terminals will act as a cap on local pricing, reflecting that exact market dynamic. As a major gas buyer that has experienced the challenge of captive market pricing in a supply squeeze, Viva Energy welcomes the advent of international competition capping the price peaks.
And that international supply is meaningful. The global LNG market is large and diverse, and both the US and Qatar are expected to bring on significant new supply in the coming years. No-one can accurately predict commodity pricing, but the forward curves for LNG contracting clearly show international pricing becoming competitive through the end of this decade.
Victoria does not have the luxury of time; the forecast structural shortfall is winter 2029 (or even 2028); the tightest of timelines for major project delivery. We need pragmatic, timely and secure solutions. New fields, new pipes, new reservation policies are nice in theory – but what we absolutely need is more gas in Melbourne. To re-iterate – as a major manufacturer reliant on gas, we welcome any local development that can increase supply and reduce costs, but we don’t plan our business on hope or conjecture.
A gas terminal in Victoria will support a more stable gas market and stimulate competitive pricing. It is a “virtual pipeline” allowing for the swift and efficient transportation of gas from where it is produced to where it is needed the most – and it can be built in time to meet the forecast shortfalls. It is our only realistic solution to secure Victoria’s gas supply.
Lachlan Pfeiffer
Viva Energy Chief Strategy Officer
This opinion article appeared on page 23 of The Australian on 27th of March 2025.
Media Enquiries:
Michael Cave
T: +61 409 647 910
E: [email protected]
About Viva Energy
Viva Energy (ASX: VEA) is a leading convenience retailer, commercial services and energy infrastructure business, with a history spanning more than 120 years in Australia. The Group operates a convenience and fuel network of almost 900 stores across Australia and supplies fuels and lubricants to a total network of nearly 1,500 service stations.
Viva Energy owns and operates the strategically located Geelong Refinery in Victoria, and operates bulk fuels, aviation, bitumen, marine, chemicals, polymers and lubricants businesses supported by more than 20 terminals and 79 airports and airfields across the country. www.vivaenergy.com.au